Batched tenders to go on despite price records

PHOTO: Batched tenders to go on despite price records

THE Government looks set to stick with an experiment to try to moderate land bids by developers even though price records were smashed in its first test this week.

Under the plan, the Urban Redevelopment Authority (URA) batches tender closing dates together in the hope that this will take the pressure off prices.

But one of three batched tenders that closed on Tuesday ended up setting new price records.

An executive condominium (EC) site in Yuan Ching Road in Jurong drew a record 16 bids and a top bid of $418 per sq ft (psf) per plot ratio (ppr) on Tuesday - a new high for ECs.

The other two tenders that closed that day were Punggol EC sites and they also fetched higher prices than earlier Punggol ECs.

Analysts mostly said the batching seemed to have failed to lower bids, though some added that it may be too early to say.

However, The Straits Times understands the URA will continue with its experiment for the second half of the year. More tests of the batching system will come over the next few months.

The URA will launch two pairs of adjacent plots with the same tender closing dates in the second half of this year - one pair in September and another in December.

Batching is intended "to encourage more prudent bidding by developers", the Ministry of National Development said in June.

The September pair are two adjacent private residential plots in Upper Serangoon View. The December pair are two adjacent EC sites in Choa Chu Kang Grove.

A key difference between these and the batch of tenders on Tuesday is that the upcoming pairs are adjacent plots, whereas the three land parcels in the Tuesday batch were in different locations.

But EL Development managing director Lim Yew Soon said that the fact the plots were adjacent could result in even higher bids.

"One developer may try to get both sites together, or consortiums could band together and try to take up both land pieces at the same time. It's so that you won't have a competitor next door."

The Yuan Ching Road EC site was won by a consortium of Evia Real Estate, BBR Development, CNH Investment and OKP Land. EL Development was one of the 15 other contenders for the plot with a bid of $343 psf ppr.

Analysts said that developers may be encouraged to lodge high bids for the paired sites if buyers continue to snap up units at launches.

"If sales volumes for the next two to three months remain healthy, especially in suburban regions, that will give developers some impetus to continue to be fairly bullish for the subsequent batches of tenders," said Knight Frank research head Alice Tan.

She added that if the location is attractive, developers may bid even higher to win both adjacent plots, "but that is unlikely if there is already an existing supply of private homes in the vicinity".

Savills Singapore research head Alan Cheong said that for the popular EC segment, developers were likely to continue to bid more aggressively. "These could be the last dregs of EC supply so developers are taking more risk. If their balance sheets are still strong, they can compete," he said, noting developers would likely have to join forces only if a plot's total cost exceeded $500 million.

"Batching is only a stopgap measure and not a solution. You have to play game theory with the bidders," Mr Cheong added.

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